AUSTRALIA TO-DAY

Auckland Star, Volume LXI, Issue 287, 4 December 1930, Page 14

AUSTRALIA TO-DAY

FEAR OF INFLATION. INVESTORS ALARMED. FAITH IN* LOCAL INDUSTRY. TARIFFS TO GO HIGHER ? (By Telegraph.—Special to "Star."') WELLINGTON, this day. • "Fear of inflation hangs over Australian industry like a black cloud, and for this reason it will be surprising if the new conversion loan of £28,000,000, due in December next, proves a success," said Mr. B. Soutar, a Wellington business man just returned from Australia.

"At the same time, it will be highly unfortunate for Australia, for it is the first real test of her willingness to shoulder the burdens which the Premiers' Conference accepted on behalf of the people. Bad as things are, there still seems to be a disposition to look to the Government to help the people out. Tho recent victory of Mr. Lang at the polls has been taken to mean that the general run of worker has not been impressed by the talk of hard work and sacrifice. He feels that much easy money has come from the Government' in the past and that ,there is no reason why another well should not be tapped. To the average man finance is a mystery. He sees plenty of money (as he thinks) in the banks, and there is a real dread that he may be impressed by the loose talk of Mr. F. Anstey, the Federal Minister of Health, who has issued a memorandum on the financial situation and has toured the country arguing that the banks should be made to carry the country's finance and that nationalisation of the banking system is imperative. "Inflation is such an attractive course (or so a strong faction of the Federal Labour party thinks) that the investing classes are alarmed. There is no denying that. And as the first people to suffer by inflation would be the holders of Government bonds, it will be surprising if the conversion loan is rapidly taken up. It will be a fine gesture to the world, but investors are thinking of more than gestures. They are concerned for their money.

More Than a Possibility. "This threat of inflation is now past the stage of a nebulous possibility. At a recent meeting Mr. Anstey revealed the fact that the Commonwealth Statistician (Mr. C. H. Wickens) had prepared a secret memorandum for the Government, in which he favoured some form of inflation. Mr. Wickens is an economist as well as a statistician, and was one of the committee of experts appointed bv the Bruce Government to prepare a report on the operations of tho Australian tariff some time ago. Mr. Wickens, speaking of the psychological effect of falling prices, said that something heroic was needed, something more than the raising of the exchange rates proposed by the economic conference, and he advocated what he called 'some measure of what ma/ be called inflation.' The only way out, as he saw it, was to check deflation. Mr. Anstey and his followers have not hesitated to seize upon this, and a contest is looming.

"What will happen it is impossible to foretell. To get the position in perspective it must be realised that despite the statements of the new Federal Government at the outset of their career, and the warnings which they received, they failed to call Parliament together for four months to put their new plans of economy into effect. That valuable time lost has placed them in the present apparently dangerous position where a deficit appears unavoidable in spite of their efforts from now on. What may happen under political pressure in the circumstances which will then arise it is idle to speculate. The attraction of a policy of inflation as a means of lightening the load of the national debt is pbvious. The fact that Australia's credit Avill be ruined will have little effect with the 'wild men' of the Federal party who have been heartened by the success of Mr. Lang at the polls and have gone so far as to attack their own leader in his absence, drawing a protest from Mr. Hogan, the Labour Premier of Victoria at what he described as 'a. stab in the back.' But these things arc much in the minds of those who are able to invest.

Industrial Stocks Soaring. "The bright feature of the situation is that Australians still believe in the future of their country as far as industrial investment is concerned. No doubt the new tariff, and the feeling that even higher tariff barriers are likely, are wbat have encouraged them to put their money into local industry. In any event, quotations on the share market have soared high in recent weeks. They may determine to act when the Government asks them. The banks have already made clear the fact that they will not underwrite the loan. The intention is to appeal to the people of Australia to vindicate their honour. Banks, life and fire insurance companies, etc., hold just under £3,000,000 in the £20,000,000 loan, which matures on December 15. More Toward 'One Government.' "Another. interesting phase of the situation is the growing feeling that the States must go>- Mr. Stanley Bruce, on his return from abro. 1 recently, made a statement which would have been unthinkable in the days of his last Ministry, when he said that the States must never go their own way again. Against the movement for separation which has been launched in West Australia there is a real move towards one Government. The bur. :n of d ua l ta*' l " tion ha/S grown as high as it can be, and the last decision of the Commonwealth to intrude on the States field and collect an additional income tax has not helped taxpayers to be reconciled to paying two separate assemblies. South Australia, for instance, would gain very oreatly from the abolition of the Separation Act and the unity of Australia under one Government. Slowly but surely that is coming."